We've been looking around in the real estate market. Even though we bought our house at the end of 2008, we've been thinking if we have another baby (no we are not expecting) that we should probably get a bigger house.
At the moment we've been doing some spring cleaning. Moved our girls together into their bedroom and pretty opened up our bedroom by about 60%. So in actuality we could probably have another 2 kids before we max out on our place.
We bought our house at a slight discount from my brother in end of 2008. He was on the way out and looking for a new place anyways. We wanted something cheaper that we can fix up. It seemed like the perfect time since the government was giving a $7,500 tax credit (the original first time homeowner credit that you had to pay back in 15 years).
What we didn't know was that the government knew something we didn't know. The market was crashing, housing prices were deflating even as we were speaking. The tax credits and later the $8,000 tax rebates were merely ploys the goverments tried to prop up an already weak market.
But we ended up still buying for about $215,000 and then in late Dec 2008-Jan 2009 we put in about $30,000 in renovations. Along with our 10% downpayment we put in a little over $50k into a housing market that was quickly sinking.
Our next door neighbor had already foreclosed as well as a few neighbors down the block. It wasn't until late 2009 that the banks sold it for $161,000. Our Fairfax County Tax Assessment said our house is worth about $193,000. The good thing about a sinking market is that taxes are cheaper and that if you have other capital you can buy rental properties or upgrade.
Recently we've been looking at houses in our neighborhood. To our surprise and amazement, one of our neighbors sold their house for $265,000. They remodeled their house in a very similar way to ours. We were looking at a clone.
It just seemed like everything we did they just copied. In any case if we sell today we probably won't get as good a price since we have been living here and there is wear and tear and we don't have granite counters or other high end material. But the similarities were uncanny.
My wife and I were thinking the other day if we did move we would want certain things in our new house. A garage, different layout for the kitchen, various changes to our bedroom, living room, an office space, etc. etc. etc. Looking at the prices in Fairfax County it would come out to around $400k or higher.
So of course, we did some calculations. If we decided to sell this place for a similar price, we would have about 20% down reducing the principal of $400k to the low $300k. That is still a bit high for me. So we need to save another $30-50k to bring our cost to mid- to high $200k and that would reduce our monthly mortgage payments.
At this point we are saving a decent amount. We are paying down the principal in the house, investing in our retirement and saving for college. If we stay here for another 2-3 years, we need to save about $15-20k each year in order to make this happen. And we're assuming the housing market will stay relatively the same during this time. I assume it is considering the large number of foreclosures and short sales still going out there. Banks are even hiding the delinquencies in order to not scare the market even lower. So I'm hoping the next 2-3 years we can save up to upgrade.
Let's see what a budget can do for us!
I will never buy a house again @ Gather Little By Little
Home Finance Real Cost of Ownership and Don't use your house to pay for your life @ rocket finance
Why renting is right for us right now @ financefreelancelife